M&A bankers looking for the nearest ledge to jump off should turn to drugs to relieve their pain. A pharmaceutical deal in the next few months could offer a needed high to depressed M&A volumes. There are whispers of encouragement from arbitrageurs, with bets placed on a takeover of Bayer (NYSE: BAY - News) by Pfizer or a bid by Sanofi for Bristol-Myers Squibb (NYSE: BMY - News) .

Finding the cash for an M&A spree is not a problem. The top 20 pharma groups have access to an average $7.5bn (£4.7bn) in cash and several management teams seem keen to use it.

Last week, Andrew Witty, GlaxoSmithKline chief, said the group would not make significant buy-backs because the crunch could create investment opportunities, while his Bayer counterpart said he hoped to strike deals when assets were at such favourable prices.

So why all the talk now?

Because, for the first time in history, Glaxo, Bayer and their peers are facing negative growth by 2011, as revenues come under threat from expiry of patents, shrinking pipelines and increased generic competition. The cost of developing innovative therapies is rising, standing 15 times higher than in the 1970s and more than three times that in the 1980s.

Striking a deal during the crunch could allow bidders to circumvent these high premiums, but it needs a brave chief executive.

A small deal would not add substantially to market share, while big deals would bet the future of the buyer on a single transaction.

Big pharma consolidation has never been cheap. Bidders have had to pay high premiums because of the perceived value in the groups' R&D budgets. Shareholders know that few blockbuster deals have achieved large cost savings. The mergers that created AstraZeneca and GlaxoSmithKline generated savings of about 8 per cent of the combined cost base.

Acquiring a biotech hasn't been a bargain. Bidders have had to pay hefty premiums of more than 65 per cent on average, while others have had their bids rejected.

But now, with credit markets shut, biotech groups with weak balance sheets may have little choice but to play the M&A game and healthcare bankers will be more than happy to arrange the unions.